Leopold is mainly remembered outside Austria for his participation in the Third Crusade. He arrived to take part in the siege of Acre in spring 1191, having sailed from Zadar on the Adriatic coast. He took over command of what remained of the imperial forces after the death of Frederick VI, Duke of Swabia in January. According to legend, his tunic was blood-soaked after the fights and when he doffed his belt, a white stripe appeared. Emperor Henry VI granted him the privilege to adopt these colours as his new banner, that later would become the flag of Austria.[2]

On his journey back that winter, Richard, travelling in disguise, shortly before Christmas 1192 had to stop near Vienna, where he was recognized (supposedly because of his signet ring) and arrested in Erdberg (modern Landstraße district). For some time the King was imprisoned in Dürnstein, and in March 1193 was brought before Emperor Henry VI at Trifels Castle, accused of Conrad's murder. Leopold's share of the immense ransom, supposedly six thousand buckets—about 23 tons—of silver, became the foundation for the mint in Vienna, and was used to build new city walls for Vienna, as well as to found the towns of Wiener Neustadt and Friedberg in Styria. However, the duke was excommunicated by Pope Celestine III for having taken a fellow crusader prisoner.[2]

In 1194, Leopold's foot was crushed when his horse fell on him at a tournament in Graz. While advised by his surgeons to have the foot amputated, none declared competence to do so. He ordered his servants to chop it off with an axe, after three swings succeeding.[3] Nonetheless he succumbed to gangrene, still an excommunicate, and was buried at Heiligenkreuz Abbey.[2]